First American CoreLogic has taken a look at the effect of the government’s efforts to drive down mortgage interest rates, which, among other things, makes for easier refinancing. According to the loan analytics company, in the first half of 2009, refinancing homeowners set themselves up to save some $11.5 billion over the next five years. The typical person who refinanced was able to drop his monthly payment by $120 a month, a reduction of 10.5%. It’s the stimulus check that keeps on giving.
Of course, you had to already own a house to be eligible for such a rebate. Others have argued that the housing market isn’t the ideal way to distribute cost savings to Americans since a third of Americans don’t own their homes. I can see the logic to that line of thought. Although the mortgage industry is no doubt happy about the refi-based approach to fiscal stimulus. The value of mortgage originations hit $664 billion in the second quarter, and 69% of that was refinancing (by contrast, 37% of origination activity was made up of refis in the last quarter of 2o08). Fair or not, the government’s plan at least worked.